Land Conversion and Farmers Preference Catur Sugiyanto, Budiono Sri Handoko dan Dwi Nugroho
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LAND CONvERSION AND FARMERS PREFERENCE
1
Catur Sugiyanto
Professor, Faculty of Economics and Business, UGM
Budiono Sri Handoko
Lecturer, Faculty of Economics and Business, UGM
Dwi Nugroho
Alumni, Magister of Economic Development UGM and the Oficer of Sleman Regency
Abstract
This paper reports the assessment of what factors determines farmer’s decision to convert their farm land rice ield into other uses, especially business and residential. We sampled 40 farmers in Sleman Regency,
Yogyakarta as a case. In addition to their social characteristics, we asked them the willingness to accept for their land if someone else wants to buy and convert it into other uses residensial or business and how much
the compensation their asked if the regency of Sleman ask them to preserve it. Based on the farmers expected return from their farming and their social characteristics, we found that farmers
tend to preserve their land. This decision is supported when they have other sources of income, farm their own land, have larger size of land, and the further from the urban. Such information is useful to the Regency of
Sleman once it needs to preserve its farming area to increase the water catchment and the reduce of the green house effect of converting the farm land rice ield into residential or business. This is true to the ields close to
the urban areas.
Keywords: land conversion, future price, farming, and sustainable farm land.
1. INTRODUCTION
Research on Agriculture Use Value has been done for years. Shi et al. 1997:94 for example, found that income from farming, capital gain and the impact of urban growth determine the farm land value in West Virginia.
The expected future development of land was applied in Orange County, California, Plantinga and Miller 2001:58. The value of land may be derived from the expected low of income from farming and from non farming activities.
The difference between the optimal value of the land and the income low from farming is the Value Development Right. Livanis et al. 2005:3 developed further the VDR including the capital gain if land is converted into the
urban. Hailu and Brown 2007:151 employed the Growth Equilibrium Model showed that the population growth, employment and per capita income from the neighboring farm land determine the farm land value in Maryland,
Pennsylvania and West Virginia. Variation in the factors inluence the land value and the method of estimating them indicate that there is no single factor and method that can be applied to any farm land. Research in this area is
important to the fast growing region with high farm land conversion. As experience in the other growing cities, Sleman regency also has a high land conversion rates. Between 2005
and 2008 the land conversion rate was 2 percent. The number of land conversion application was also ranked the highest in 2008 204, with the wetland farm land size up to 81,762 meter square and 8,324 meter squares dry land.
1 This paper is part of Nugroho’s Master of Economic Development thesis at UGM 2010 with extensive comments from Sugiyanto’s and
Handoko’s. As usual, we responsible for any errors and omission. Correspondence: catursugiyantoyahoo.com
KINERJA, Volume 16, No.1, Th. 2012: Hal. 29-34
30 Undervaluing the land is the common factor determines the high conversion rate. The failure to internalize
the externalities and the growth of the urban area raise the farmland conversion, Hailu and Brown, 2007:149. Even if the government set the area be the land conservation area, incomplete information about compensation
also keep the land conversion rate increasing. This paper reports the assessment of what factors determines farmer’s decision to convert their farm land rice ield into other uses, especially business and residential. We
sampled 40 farmers in Sleman Regency, Yogyakarta as a case. In addition to their social characteristics, we asked them the willingness to accept for their land if someone else wants to buy and convert it into other uses residential
or business and how much the compensation they ask if the Regency of Sleman ask them to preserve it. In general the size of the land, the distance between the land and the closes road, education, age, share of
income from farming, and the number of child determine the level of willingness to accept and the compensation. Moreover, based on their expected return from the farming and their social characteristics, we found that farmers
tend to preserve their land. This decision is supported when they have other sources of income, they are getting older, have smaller number of child, and have higher education. Such information is useful to the Regency of
Sleman once it needs to preserve its farming area to increase the water catchment and the reduce of the green house effect of converting the farm land rice ield into residential or business. This is true to the ields close to the
urban areas. One dificulty the farmers experience are how to determine their expected income returns from their
farming. This is because of their limited information on future prices. Moreover, the monopsonist practice in buying the paddy limit the option the farmers have in setting their selling prices that limit the value of income stream from
their land. We propose that should the Regency of Sleman and other need to preserve their farm -lands, they could
do so by increasing the opportunity of young farmers generation to obtain better education and out of farm jobs. In short, providing better information about price to farmers and improve the competitive market of paddy can increase
the farmers expected income and the likelihood to preserve their land. This paper is outlined as follows. Next, we discuss the methodology followed by the data used for this
research. Section four discusses the estimation results and the last section, section 5, concludes.
2. METHODOLOGY
